Is a Retirement Community Right for You?

This question goes through every retiree at some point. First thoughts are usually, “an old folks home? No way!” However, upon further review, many people warm to the idea.

There’s a lot to consider if you’re thinking about moving into a retirement community. They’re not cheap.

First, there are up-front entrance fees. These are in addition to the monthly fee, and don’t be surprised if these exceed the cost of a new home in your head.

There are usually different entrance fee options, based upon the refund feature you select. A zero refund upon death means cheaper entrance fees. On the other hand, a higher refund at death means higher upfront fees. Most people prefer that some refund is paid to their family or heirs. However, if you don’t want or need to leave a legacy, you’ll choose a cheaper entrance fee with zero refund option. Keep in mind, entrance fees are typically non-refundable.

Therefore, it’s important to be certain about a community before committing, as you will likely be risking a lot of dough if you change your mind about becoming a resident.

Next, there are monthly fees. While not all retirement communities have upfront fees, they all have monthly fees. These fees support the facility, resources and staffing that make retirement communities so interesting and attractive. Costs vary, but are typically several thousand dollars per month.

The fees will seem expensive but be sure to factor in cost savings such as no more home maintenance expenses, cheaper golf rounds, lower food and utilities costs, etc.

One big plus, especially as you get older is that a portion of your monthly fees might qualify as medical expenses for itemized tax deduction purposes. Be aware that the threshold for your aggregate medical expenses must exceed 10% of your adjusted gross income before a deduction is allowed. Unfortunately, under the new tax reform proposal, this medical expense deduction may be eliminated.

Naturally, be sure you understand what’s included in your monthly retirement community fees versus what’s extra.

Heath care Continuity is a prime attraction of retirement communities. However, sometimes these services incur additional charges as Medicare only covers limited rehabilitation, or nursing care. If you don’t have long-term care insurance, such costs become a personal expense.

Last but not least, is miscellaneous costs such as real estate and tax obligations. Common extra costs include transportation, activity and excursion costs, housekeeping, etc.

The Bottom Line

Do your homework and know what you’re getting into both financially, and socially. Remember, you have worked your whole life in order to live your golden years in luxury, so plan correctly. The cornerstone for success is having a comprehensive Retirement Master Plan, that is customized for you and your family. These will include a retirement income analysis, so you’ll never run out of money, a forward-looking tax strategy so you’ll pay less taxes in retirement, a tactical money management approach and asset protection we call Wealthguard.

If you have any comments or question, or need help with any of these, feel free to contact me.

Cheers -Keith

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